CRMP - Certified Reverse Mortgage Professional Ethics and Professional Conduct Questions and Answers — Questions and Answers
Question 1: A CRMP is working with a client who needs mandatory repairs as a condition of their HECM loan. The CRMP's cousin owns a reputable home repair company. What is the most ethical action for the CRMP to take?
- Recommend only the cousin's company to ensure the work is done quickly and by a trusted source.
- Provide the client with a list of several qualified, unaffiliated contractors for them to choose from.
- Insist the borrower use the cousin's company but offer to pay for the appraisal out of pocket to offset the conflict.
- Recommend the cousin's company along with others, but only if the family relationship is fully disclosed to the client in writing. (Correct answer)
Correct answer: Recommend the cousin's company along with others, but only if the family relationship is fully disclosed to the client in writing.
The NRMLA Code of Ethics emphasizes integrity and the timely disclosure of potential conflicts of interest. While it is not unethical to recommend a related party, it is a significant ethical breach to do so without full transparency. Providing a list of multiple contractors is good, but the key ethical requirement is to disclose any relationship that could be perceived as a conflict, allowing the borrower to make a fully informed decision.
Question 2: Which of the following statements in a television advertisement for a HECM would be considered a prohibited, misleading practice?
- "This FHA-insured loan allows you to access your home's equity."
- "You can eliminate your monthly mortgage payment and improve your cash flow."
- "This is a government benefit that ensures you will never lose your home for any reason." (Correct answer)
- "You must still pay your property taxes and homeowner's insurance."
Correct answer: "This is a government benefit that ensures you will never lose your home for any reason."
Describing a HECM as a 'government benefit' is highly misleading, as it is a loan that accrues debt and must be repaid. Furthermore, stating a borrower can 'never lose their home for any reason' is false; failure to pay property taxes, insurance, or maintain the home can lead to default and foreclosure. This type of language is a serious misrepresentation prohibited by FHA and FTC advertising rules.
Question 3: A prospective HECM borrower is having trouble finding a HUD-approved counselor with immediate availability. To help the client, the loan originator offers to call a specific counseling agency where they have a good relationship and schedule the appointment on the borrower's behalf. This action is:
- Permitted as good customer service to help an elderly client.
- Permitted only if the originator provides the client with a list of at least three other agencies.
- Prohibited, as it could be construed as steering and interferes with the counselor's independence. (Correct answer)
- Prohibited, unless the loan originator discloses the action in the loan file.
Correct answer: Prohibited, as it could be construed as steering and interferes with the counselor's independence.
HUD and NRMLA guidelines strictly prohibit lenders or originators from steering clients to a specific counselor or scheduling appointments for them. This rule is crucial for maintaining the required independence of the counseling session, which is a key consumer protection. The borrower must initiate contact with the counselor of their choice without influence from the lender.
Question 4: A loan originator meets with an elderly client and their adult child. The child is adamant that their parent take the maximum cash out at closing to help with the child's own financial difficulties. The client appears confused and uncertain. According to the NRMLA Code of Ethics, what is the originator's primary responsibility?
- To follow the child's instructions, as they are acting as a family advisor.
- To ensure the client fully understands the loan terms and is making a voluntary decision free from undue influence. (Correct answer)
- To structure the loan as the child requests but make a note of the client's hesitation in the file.
- To refuse the application immediately and report the adult child for suspected financial abuse.
Correct answer: To ensure the client fully understands the loan terms and is making a voluntary decision free from undue influence.
The NRMLA Code of Ethics' value of 'Fairness' requires members to treat consumers with respect and dignity. The foremost ethical duty is to the borrower. The originator must prioritize the borrower's understanding and ensure their decision is voluntary and not the result of pressure or undue influence from family members or others. While reporting abuse may become necessary, the immediate ethical responsibility is to protect the client's autonomy.
Question 5: Which of the following best demonstrates a CRMP's commitment to the ethical principle of professional competency?
- Matching a competitor's interest rate to win a client's business.
- Sponsoring a table at a local senior health fair.
- Attending an industry conference to learn about recent changes to FHA's Financial Assessment guidelines. (Correct answer)
- Maintaining a professional and accessible office space.
Correct answer: Attending an industry conference to learn about recent changes to FHA's Financial Assessment guidelines.
The NRMLA Code of Ethics requires members to provide services in a competent manner, which includes acquiring and maintaining the necessary knowledge and skills. The reverse mortgage industry is subject to frequent and complex rule changes. Actively pursuing continuing education on critical topics like the Financial Assessment demonstrates a commitment to providing accurate and competent advice, which is the core of this ethical principle.
Question 6: A loan originator receives an application from a prospective borrower who lives in a neighborhood primarily occupied by a racial minority group. The originator knows from experience that appraisals in this area often come in lower than expected. How should the originator ethically proceed in accordance with fair lending laws?
- Advise the applicant that their neighborhood makes the loan riskier and suggest they apply for a smaller loan amount.
- Increase the origination fee to compensate for the perceived property risk.
- Evaluate the application based on the borrower's individual financial merits and the property's specific characteristics, without regard to neighborhood demographics. (Correct answer)
- Inform the appraiser about the neighborhood's demographic composition to ensure they are aware of all factors.
Correct answer: Evaluate the application based on the borrower's individual financial merits and the property's specific characteristics, without regard to neighborhood demographics.
The Fair Housing Act and Equal Credit Opportunity Act prohibit discrimination in lending, including the practice of 'redlining' or 'reverse redlining', where lending decisions are negatively influenced by the racial or ethnic composition of a neighborhood. The only ethical and legal course of action is to process the application based on the applicant's creditworthiness and the specific property's appraised value, completely disregarding neighborhood demographics.
CRMP - Certified Reverse Mortgage Professional Ethics and Professional Conduct Questions and Answers
A CRMP is working with a client who needs mandatory repairs as a condition of their HECM loan.
The CRMP's cousin owns a reputable home repair company.
What is the most ethical action for the CRMP to take?